Hinduja Global Solutions has exited from the insurance business in India after regulatory changes impacted its revenues. Changes prescribed by the Insurance Regulatory and Development Authority (IRDA) late last year with regard to in unit- linked plans of life insurance companies had adversely impacted some of the players. IRDA has capped the expense charged by insurance companies. As a result, all the players reduced the commission paid to agents and distributors

Hinduja Global Solutions (HGS), the back-office arm of the Hinduja group, has exited from the insurance business in India after regulatory changes impacted its revenues.

Mr Patha De Sarkar, Chief Executive Officer, said the insurance business used to be a ‘1,000-seat' operation for the Bangalore-based company.

Redeployed

“All the impacted employees were redeployed internally in other areas of operation.

This space was not very big for the company,” said Mr Sarkar, adding that the Indian insurance practice was not ‘very big' for the company.

Changes prescribed by the Insurance Regulatory and Development Authority (IRDA) late last year with regard to in unit-linked plans of life insurance companies had adversely impacted some of the players.

IRDA has capped the expense charged by insurance companies.

As a result, all the players reduced the commission paid to agents and distributors.

So, with effect from September 1 last year, for all new ULIP sales, agents got a lower commission.

As a result, outbound lead generation ceased to be a lucrative business for back-office companies.

Now, the situation has worsened for back-office players with IRDA proposing to ban third-party administrators from operating as intermediaries for Government-sponsored health-insurance schemes.

HGS serves customers in verticals such as telecommunications, pharmaceuticals, life sciences, financial services, logistics, etc.

Most of the company's revenues are generated from voice-based services.

Results

For the quarter ended June 30, the BSE-listed HGS reported a 12.2 per cent fall in net profit to Rs 20.29 crore from Rs 23.11 crore reported a year back.

Revenue for the quarter was down by 22.8 per cent to Rs 278.4 crore (Rs 226.6 crore).

The company is now planning to set up its fourth centre in the Philippines. It intends to hire around 1,000 persons during the current year.

HARD TIMES

· Revenues of insurance companies fell after IRDA capped expenses charged

· This led to lower commissions for agents, distributors, eventually hitting back-office companies.

· Proposed ban on third-party administrators for Government-sponsored schemes may make things even worse for back-office players